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Sec. 12 of Republic Act 9194: Congress’ ticking time bomb

(Article published in the Mar 31,2003 issue of TODAY, Business Section)  

Unless the Supreme Court and the Court of Appeals act quickly, the land mine planted by Congress on Philippine shores in the wake of its retreat from the threat of countermeasures from the Financial Action Task Force (FATF) coalition, will explode on April 22. Over a billion pesos, or, to be more precise, P1,036,433,634.17, previously determined by the Antimoney Laundering Council (AMLC) to be probably related to an unlawful activity, will be free to flow into the banking system and, like a chemical weapon unleashed, contaminate our money supply. Victims of the predicate crimes will be left holding an empty bag.

The time bomb is in the Transitory Provision of the statute that recently amended the Antimoney Laundering Law.  Section 12 of Republic Act 9194 in seeming innocence provides that “existing freeze orders issued by the AMLC shall remain in force for a period of thirty days (30) after the effectivity of this Act, unless extended by the Court of Appeals”.  RA 9194 took effect on March 23 and pending before the judiciary on that date were 30 freeze order cases, 28 in the Court of Appeals and two in the Supreme Court.

If I know the dedication and efficiency of the people manning the ramparts of the AMLC and the state lawyers assisting them, the appropriate motions have been filed by now to bring this matter to the attention of the relevant courts.  At the end of the day, however, the ball will be in the Court of Appeals and we wait with bated breath to see if the appellate justices will score for the country or not.  If they do, that will be a three pointer in the FATF’s evaluation of how well the country’s concerned institutions are capable of implementing the law.  Otherwise, their already dim view of the relevance of our judiciary in the fight against dirty money will grow darker still.

Actually, the power of the AMLC acting on its own authority to freeze deposits and similar accounts, found in Sections 6(6) and 10 of RA 9160 prior to its amendment, was not a requirement of the FATF.  What the FATF wanted and still wants in any antimoney laundering legislation is the ability at the administrative level of the government to look into transactions for the purpose of determining whether or not there are indications of money laundering.  Our bank secrecy laws, before RA 9194, prevented that.  Hence, we had the dubious distinction of being in the original list of non-cooperative countries and jurisdictions.  We were among the founding members, as it were, found to have defective laws.

The grant of authority to the AMLC to freeze deposits for a limited period without need of going to court was our way of testing the resolve of FATF’s insistence on administrative access.  Thus, Sen. Ramon Magsaysay, Jr., during the Bicameral Conference Committee meeting on September 28, 2001, on the eve of the deadline given by the FATF for us to come up with adequate legislation, admitted as follows:

“…this is our [referring to the Senate] consolation to the FATF that although we still have to go court to open an account but (sic) the asset or the account is frozen for twenty [reduced in the law to 15] days to allow the account holder to go and exhaust all administrative measures.”

The FATF, as it turned out, was not at all consoled.  And we have had anyway to give in to the FATF requirements early this month.  Otherwise, we had to bear with the FATF’s recommendations of countermeasures to member countries.

From the effectivity, however, of RA 9160 on October 17, 2001 until the amendatory law takes effect, the AMLC’s freeze order was the single most effective weapon against dirty money.  As of March 22, 457 freeze orders had been issued by the AMLC, involving mostly money representing proceeds of swindling and scams.

Freezing an account and keeping it frozen was not a stroll in the park.  Section 10 of the law and Section 3 of Rule 3 of the Implementing Rules require the finding by the AMLC of “probable cause” that the account is in any way related to a predicate offense and/or money laundering offense.  This is the same standard of certainty that is required of investigating fiscals and prosecutors when deciding whether to file a case in court or not.

Simultaneous to the issuance of the freeze order is the sending of notice to the account holder that his account has been frozen, telling him that he has 72 hours upon receipt to explain why the order should be lifted.  The AMLC in turn had another 72 hours “to dispose of his explanation”, i.e. to either maintain or lift the freeze order.  The freeze order self-destructs if the AMLC does not dispose of the matter within that period. 

The freeze order, in any case, is good only for a maximum of 15 days (The number “15” is the result of haggling in the conference committee, the Senate version of the bill had an effective duration of 20 days; some Congressmen wanted only 10.  A similar wet market approach was also taken in the fixing of the then threshold amount in the original law of P4 million).

If the AMLC wanted to have a longer freeze period, the order “may be extended upon order of the court, provided that the 15 day period shall be tolled pending the court’s decision to extend the period.”  By accident or design, the law did not state to which “court” the AMLC should go and the two cases pending in the Supreme Court were expected to clarify the issue.  Congress, however, pre-empted the Supreme Court and, in Section 7 of RA 1994, clearly vested jurisdiction over freeze order on the Court of Appeals.

Despite all that tedium, however, the AMLC had issued 51 freeze orders and, as of March 22, were still in the process of investigating or evaluating 124 reports and letters of money laundering.  Then the rules of the game suddenly changed.  Because the FATF did not fall for the freeze order bait and continued to insist on administrative access to deposits without a court order, our legislators retracted the offering.

Section 7 of RA 1994 amended Section 10 of R.A. No. 9190 and the AMLC found itself without its power to freeze accounts without first going to court.  Instead, AMLC is now required, after it determines that probable cause exists to believe that a monetary instrument or property is in any way related to an unlawful activity as defined in Section 3(i) of the law, to file an application with the Court of Appeals for the issuance of the freeze order.  The order is good for 20 days (just like a temporary restraining order) unless extended by the court.

Out the window go all the arguments so staunchly defended during the deliberations of the Bicameral Conference Committee of the old law, by, surprise!, the senators themselves, in favor of the freeze order (without need of going to court) in the original law.  Listen, for instance, to Senator Pimentel: “The problem of allowing the council to go to court before it issues the freeze order is that the account order can very well disappear with this amount before the court can issue a freeze order…the bird would have flown the coop before action can be taken…”

A token attempt was made in the amendatory law to avoid flight of the money.  The application by the AMLC for a freeze order is allowed to be ex parte.  That means the case may be filed and the freeze order may be granted without notice to the accounting holder, thereby not tipping him off that his account will be frozen. 

But on the comfort that an ex parte proceeding gives, Senator Cayetano, had this to say when he argued against the House version of the original law, in the characteristic flair of his brilliant Taglish: “…First, why the Senate version merely requires the council or the AMLU [now the AMLC] to freeze.  Because the idea is immediately to ensure the non-removal.  Okay, now, the House version would require a suit asking the court to issue an ex parte order.. If I were the counsel of the money launderer, I will guard all the courts.  Lahat ng husgado sa Metro Manila at maglalagay ako ng abogado dyan.  Pag-file noong kaso ng AMLU for ex parte, will immediately file an opposition para hindi ex parte.  So, you are not sure whether the court will issue ex parte.  Remember, you are taking about a discretion by the court.  Because you cannot dictate on what the court will do.  Even if you ask (sic) an ex parte petition, the court may say, “No. I would like the other party to be given an opportunity to explain, hindi ba, why it sould not be issued ex parte.  By that time, labas na ang bituka, hindi ba?  So, maimo-move nya.  Mailalabas nya na yung pera.  So, that is the very reason...kasi ganyan sa practice, eh.  I remember noong isang kaso ng rebellion kay Enrile, ginuwardiyahan ko lahat yung mga clerk of court, eh.”

To complete the retraction of the offering, our legislators not only promulgated rules to govern freezing of accounts after the effectivity of the amendments but also reached back to accounts that had been frozen under the original law.  So much for all that argument against retroactivity that they raised in protecting accounts opened prior to the anti-money laundering law.  Section 12 of RA 9194, as previously pointed out, limited the lifetime of those freeze orders to thirty days from the effectivity of the law.

And they imbedded an ambiguity to boot, wittingly or unwittingly designed to cause  confusion.  The text of the Transitory Provision talks only of “existing freeze orders  issued by the AMLC” that will remain in force for 30 days after the effectivity of the Act, unless extended by the Court of Appeals.  It is silent on whether those orders issued by the AMLC which have already been extended by the Court of Appeals prior to the effectivity of the law will likewise lose their effectivity after the period of thirty days unless re-extended by the Court of Appeals.

All the hard work, expense and advantage won by the country over dirty money when the freeze orders were issued by the AMLC under the old law will go to waste if the Court of Appeals does not act on time.  In less than a month, we will know whether or not our honorable justices are as honorable as our legislators.